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tv   Your Business  MSNBC  February 12, 2011 5:30am-6:00am EST

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finding your niche in a crowded market. how getting personal will help you keep your customers. and where's the money? we'll talk about the latest trend -- crowd funding. it's time to make money coming up next on "your business."
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hi there, everyone, i'm j.j. ramberg, and welcome to "your business" where we give you tips and advice to help your business grow. economists say that future job creation will come from newly created small businesses, and now the government wants to help. administration officials, america online founder steve case, and kaufman foundation ceo carl schram, came together in washington to announce start up america. an initiative designed to spur the growth of small businesses. >> all new net job creation in the united states is in firms
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less than five years old. if we're going to create an economy that will grow jobs, we have to create an economy that will grow little companies. >> we want to really celebrate the work of entrepreneurs, shine a spotlight on them, look for ways to educate people about entrepreneurship and how mentor entrepreneurs with other entrepreneurs so they can take their ideas forward. >> startup america pulls capital from the sba, the kaufman foundation and private sector companies in an effort to support and mentor entrepreneur around the country. meanwhile, the senate did its part to support small business owners by voting to repeal the controversial 1099 clause in the health care law which would require businesses to expand their tax reporting to the irs. >> today was a victory, and it's not so much a victory for me or really anyone else in the senate. it's a victory for about -- about 40 million businesses across this country who are
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literally facing a mountain, a mountain of paperwork if this 1099 would stay as the law of the land. >> this has happened a bunch of times. i hear of someone who wants to start a business selling pasta sauce or t-shirts or make stuffed animals, and i think for a moment is there really room in the market for another business like that? well, this next story we're going to show you is about a guy who entered into a market that some may have thought was tapped out. he found success in it with not one, not two, but three separate tea companies. ♪ >> smell this. smell this. that's the fresh dargeling. >> steve smith of portland makes and sells high-end teas. he's been in the business for
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more than 30 years. in his career smith has created and sold very two successful companies. tazo tea and stash tea. he's at it again with a you in company, stephen smith teamaker. >> is stephen smith working for you? >> it is -- >> smith is checking out his teas at zupan's markets, a local oregon chain. owner mark zupan remembers when smith first approached him about selling his latest brand. >> when smith contacted me, and i know steve, i said we don't need another tea in our stores. >> mike zupan said we need another tea like we need a hole in the head, something like this. this is a category that's crowded. i don't need more tea. >> zupan's response came as no surprise. >> i agree. the category's crowded. there's too many choices, too much stuff that doesn't sell. >> he says, you got to take a look at my tea and give me an opportunity. we did, we met with him. >> i convinced him to come in and taste tea with me. he didn't have any room on the shelf. he didn't think there was any
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reason to have any additional products. we had tea for an hour here. he ordered 75 cases for each of his stores. >> what's his secret? from stash in the '70s to tazo in the '90s to stephen smith teas today. how has he continued to be successful in what could be seen as an already overcrowded market? his staff isn't quite sure how he does it. >> my best guess to answer your question will be he's detail oriented nature and obsessing around every little detail. >> i think it's because of his focus. he has such a radar focus. he has all of these ideas that are constantly percolating. >> we asked smith himself. how do you do it? >> the tea category is growing, but growing slowly. if you take the specialty side of the category, if you remove that, you look at the growth there, and that's where all the growth is. >> smith says early on he saw
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something that most others missed. >> people felt that tea was price sensitive. i felt that tea was not price sensitive. or at least as price sensitive as some thought. >> wonderful. >> maybe we should do thi one. >> my motion was if you bring a better product to the market, if you charge more for it, you make people pay a little bit more for a better product, they're going to appreciate it more. and -- and that notion was validated by consumers. >> we can bring product in and put it in the stores, but that doesn't mean it sells. >> smith agrees. he says that getting people to choose your product from a crowded shelf starts with the packaging and ends when they taste the tea. >> it's packaging that stops you in the aisle. it's packaging that when you're 10, 15, 20 feet away, you look down the aisle, you can see a different block of products. once you've got them to look and if you can get them to grab the package, we got you.
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we got you. >> the packaging only gets them once. it's the tea itself that brings them back as regular customers. >> and then the product inside the package has got to be a dramatic difference from what they've experienced in the past. you've got to taste the tea to get an understanding as to why -- why you need a tea like this. >> the number-one thing for product, i think, is you have to get the product into the customer's mouth. if you can get them to taste it, eat it, they'll make a decision whether they like that or no, i don't want that. if you can do that and the product's good, you'll be successful. >> we've had restaurants and bakeeries and other places push back a little on our cost to say you're nearly twice as much as what we're currently paying for tea. and my comment is, try it. you're going to sell twice as much tea. and they do.
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so stephen smith clearly proved that there was more room in the tea category, but what if you want to introduce a product into another crowded market? let's ask this week's board of directors. ceo of behind the burner, and gene marks is president of the marks group and a small business columnist for "the new york times." great to see both of you. i get this question a lot and think it a lot because we have people who come on, do their elevator pitches, and have an idea for a salsa or pasta sauce or something where it feels like there are a lot of sauces and pasta sauces, whatever it is, out there. how is it going to be successful, and lo and behold it's successful. >> after all the years of doing what we've been doing, sometimes it's who you know. i mean, it's not just the passion that you have and making a great product. but this guy was real successful dude. i many, he put really -- even i know tazo teas and i order regular coffee at starbucks. the guy had a track record. he did he get a meeting with the manager of his produce market or food market is because he had a track record and was able to get
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his passion across. so, you know, i hate to be like cynical about it, but a lot of it is who you know and how you can make the connections and using experts to help that -- help you do that. >> yeah. then it becomes a question which we get all of the time which is how do you make those connection. he knew people, what if you can't? >> power to the pavement. i think it's just -- you have to be relentless. part of being an entrepreneur is being flexible, changing your plan, things are going to work out, they're not going to work out, don't give up. failure's not an option, and you will be successful. >> i can add to that. leverage social community sites like a linkedin for example. if you know that you're linked even by 87 connections over to somebody that might be able to get your product on the market, use that and say that you can make a connection that way. so you're absolutely right. pounding the pavement, but maybe social networking. >> tea was so good -- i was trying and trying, couldn't get in touch with with somebody. i forgot they had linkedin, one person away from me, and i forgot. >> not only does it provide an opening but you see who others are linked in to.
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>> and social media is free. a great way to get your product or service out there. facebook fan page, facebook group, using twitter. all of these tools can really get the word out for your product and service. >> have passion, have a great product. in the end, it is who you know. >> right. all right, thank you very much, you guys. in this economy, it is more important than ever to know how to get and then how to hold on to customers. for the owner of a california-based skin care business, that means going the extra mile to make sure her clients keep coming back. if you happen to be one of celeste hilling's customers, chances are you'll be hearing from her or one of her employees. >> in today's world, that may be on a plane, it may be in a car, it may be via twitter, facebook. e-mail. cell phone. what we've learn sudden there's not one way to reach people, it's a combination of all those
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things together in an ongoing, consistent chat with them. >> the ceo of carlsbad, california, skinthauauthority s her company provides an interactive customer experience. >> we're talking about how do we create a dialogue with a consumer. >> she's made it skinauthority's mission to create longlasting bonds with its customers. skinauthority promotes an intimate approach to business by reaching out to every client. a team of licensed skin care coaches is responsible for maintaining contact with customers in a variety of ways. >> any time of the day, you can call, e-mail, cell phone, texting, we've done some of that, too. >> the conversation isn't only designed to answer questions or field comments. it's a chance for skinauthority to build a profile of every customer. >> are you a mom, are you a dad, are you active, are you a traveler? what stage are you in your life, what issues have you had with your skin before? so it's building this narrative about you.
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>> skin care coaches can customize answers and potential skin care solutions for every client. the hope is that customers will then feel comfortable enough to start reaching out to skin authority on their own. skinauthority's personal touch is certainly paying off. despite the economic downturn, revenue continues to climb. and about 75% of customers have repurchased the company's products. skinauthority's free advice applies to every customer. it doesn't matter how much or how little someone spends. >> people who buy over the phone, who paid $6 for one of our travel-sized cleansers, get that ongoing touch and say, you know i only bought the $6 cleanser, right? upon the realty is they're shocked that they have that level of support. >> they're skeptical, why are calling me? then we explain, you know, we're your coach. we've been assigned to you. we're here for you. you interact with us as you want to interact with us. >> the personal touch has been so successful for the company that traditional advertising has
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never been an issue. >> when you have a relationship as strong as we have with our customers, they tell everyone about it. and in the end, that's more powerful than any color photo. >> with an expanding customer base and the possibility of new opportunities, the company that started in celeste hilling's garage still has plans to grow. regardless of its size, however, customer service with a personal touch is something that skinauthority will never sacrifice. >> we want you for life. it costs us a lot of money to gain you as a customer, convince you that our brand is for you. once we convince you, we want you to stay with us. and we really appreciate the value of that relationship. by now surely you've all heard about the phenomenon of mobile applications. you may even want to design an app for your company. if so, here are five services that can help you do it courtesy of "entrepreneur" magazine.
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swebapps offers analysts tools to track how it's doing. isites provides applications that are available in 15 minutes. taplynx organizes units such as banners. looking to cash in on the gaming craze? check out gamesalad. it offers tools to develop your own game. and if you're looking for a little more designed complexity, app breed ever offers kits and customizes it on your company's needs. do you want to know where's the money? we'll have important information on the growing impact of crowd funding. today's elevator picture plays a uniqued springed instruments that he says hits all the right notes.
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seven years ago, i had this idea. to make baby food the way moms would. happybaby strives to make the best organic baby food. in a business like ours, personal connections are so important. we use our american express open gold card to further those connections. last year we took dozens of trips using membership rewards points to meet with the farmers that grow our sweet potatoes and merchants that sell our product. we've gone from being in 5 stores to 7,500. booming is using points to make connections that grow your business. in this week's "where's the money," we're going to talk about crowd funding. have you heard about it?
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i wanted to dig into more of how you can use a host of web sites to raise money for your business. bruce elderlily is president of the moolala, and author of "why smart people do dumb things with their money and what you can do about it." it's great to see you. what is the term crowd funding? i keep hearing the term. >> a little money from lots of people. you could go to the bank, now you can turn to friends and family in a way that utilizes the internet and get friends of friends and strange force support your business. it's a different way of thinking about it. >> you say a little money. you don't have to say, okay, i need $20,000 from you. you can go to you and say i need $500, and you $100 -- >> you don't have to hold out the basket at your cousin's wedding. you don't have to do the family faux pas. you can ask through the internet, for a loan. you can ask for a donation. sites encourage you to donate to a cause that you believe in. the third model, the one we're
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most used to, is revenue sharing. you actually get something back if you choose to invests in a company. >> okay. how do you do that? there's a web site? >> it's called pro-funder.com. there aren't a lot because of regulatory reasons. they only deal with incorporated businesses. second, come up with your idea. i have an ecodry cleaner, i want to go to five locations. you want to write up your fundraising pitch to put on the web site. one of the big things you have to sort out is a term sheet. and basically that's -- what do i give you? you give me $1,000, what do i give you? in this case it's a portion of revenue. the maximum time period is five years. i could say, if i raise $10,000, i'm going to give 10% of my revenues to my investors for three years. and that's how it works. >> when i say i'm going to take money from you, i say, okay, you're going to get 2% of my revenue from 2012 to 2014? >> there's the risk for the investor, right? there could be no revenue. this couldn't be -- might not be
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a business that makes any money. then there's risk for the company owner, too, because you might give people a piece of your revenue and have no money left in profit at the end of it. >> that's what scares me a little about giving revenue. what if your expenses are so high that you don't have enough money at the end of giving the revenue to pay your expenses? >> for startups, that's a revelation. one that i saw gave revenue starting a year out. they didn't give revenue right away. the brilliance is you come up -- the terms you want. you don't negotiate, you come up with it and post it. >> okay. all right. so what happens if i go out and say i want $10,000 out there, then what do you do? >> you put it on the site. you tell everybody you know. you hope you get buzz from people you don't know and people you don't. it's all or nothing. you either raise the $10,000 or you don't. if you come in at $8,000, everybody gets their money back and you don't get anything. >> and this site helps with all of the legal stuff and the financial stuff? they take care of it all? >> yeah. and you can buy different packages.
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the low end, $100, on the site. at the high end, they give guidance on compliance. one of the advantages is they've got templates for term sheets. entrepreneurs go term sheets, no clue. there are examples that you can use. >> this is such an interesting idea. we talk so much on the show about getting friends and family to invest. but what this does, it creates a way to do it that makes sense. and it's -- formal and legal and it does a good job. >> profunder.com. >> thank you very much, bruce, appreciate it. we recently met dozens of small business owners at the national association of music merchants in california. we brought a unique product to our elevator to see if he can strike a chord with our panel. >> hi, i'm bob mcnally. >> hey, bob. >> i designed the strum stick for people who don't play anything. ♪ >> i've been designing instruments for 30 years, and i made the strum stick so learning could be easy and fun.
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you finger one string and strum all three. it sounds great right from the beginning. and there's no wrong notes. ♪ >> we've sold 65,000 strum sticks in -- since we've started making this instrument. and we've sold in music stores, gift stores, and catalog stores. it's great for families, great for kids. in fact, it's so easy -- ♪ >> even adults can play. 88 people in the u.s. wish they could play a musical instrument, that's from a gallup poll. the strum stick is a perfect instrument for that vast untapped market. if you go to our web site, strumstick.com, you can see passionate testimonials from our customers. and we're looking for a half million dollars to expand our marketing and our sales. this is expansion of an already successful business and two to three-year payout. big roi in the next year. >> all right, bob. >> i wanted to let you finish so
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they could get the financials in there. great pitch. this is our first elevator pitch that's been accompanied by music. ♪ >> i'm one of the 88%. you got me. you have one customer, but let's see what the investors think. let's start with you. how was his pitch? did he include everything? >> his pitch was good. he talked about the 88% of people who would love to play an instrument. quantify the market size, and further i would need more information on customer acquisition. how are you going reach those people? on line, off line, through stores? >> good. if we have a meeting, i'll get you all that information. and the 88% is 88% of the adult population in the united states. that's over 200 million people, potential market. >> all right. gene, what do you think? >> first of all, i cheated a little. we were talking beforehand. john anderson from yes, he was playing the strum stick. it's on the web site. i'm like a huge yes fan. i'll tell you -- i'm sold on a meeting right from there, okay? one thing i can give you as far as advice -- >> please. >> you've got a history, as well.
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we were talking about you've got experience, others others. if i'm going to invest with you and meet with you, i want to meet with you, as well. strum stick is good, you're good. i'd take the meeting. >> and i suppose you would, too? >> i would take the meeting even based on the fact that he sold 65,000 units. that means there's traction on the business. >> or based on the fact that he sarajevoinat -- that he serenad you with his hitch. >> nice to meet you. >> nice to meet you, too. >> if you would like feedback from our panel on your chances of getting interested investors, send us an e-mail. the address is yourbusiness@msnbc.com. please include a short summary of what your company does, how much money you're trying to raise, and what you intend to do with the money. somebody watching might be interested in helping you. it's time to answer some of your business questions. divia and are with us again. the first sdquestion is from th
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owner of a translation business. >> in an industry like mine where there's little or no regulation, how can i form a best practices initiative for my company to really help us set ourselves apart from the rest of the industry? >> i think it's interesting there's an asset and a liability to this, right? the liability is another company does something bad, and it looks bad for you. or because there's no regulation everyone else is bad and so you can rise from the heap. how do you get so that you rise? >> to be like a best practice is tough. in my business i'm going to say, oh, we're experts at installing quick books. therefore we know all of the best practices. you can't say it, you have to prove it. so the only thing you do is you put in your time. and it could take years. you have to get testimonials from your client and you have to document that stuff. and hopefully you build up history some best practices that you can then preach out to the world and to prospective clients. >> i think first you need to separate yourself from the competition. so you need to establish yourself as an expert and a voice of authority so people listen to you. you have to speak at conferences, publish a blog,
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write and position yourself as an expert, and then there's a voice that people want to listen to. >> that's a great idea. let's move to the next one. this is a question about online ads. >> my company's a service-based business. and i'm curious how you guys think i can quantify results from online advertising such as how do i determine how much a click is on one of my ads? >> pretty easy. >> absolutely. i think every single dollar you spend in marketing, there should be an roi for. you should be measuring every single piece. so the first thing to do is set up a google analytics account. and see where all your traffic sources of what's coming in. it's from your online ads. you can see how many visits you got. then further build in analytics, an advantage ---eda vansed tracking system for users. when you get a click from the online ad, you can see the source, see if they registered and bought. >> the second part which is absolutely true is once that customer expresses some interest, have some type of a
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data base or crm system in house. you can track where they sourced it, did they come from your web site, come from calling in. at least you can track where the prospects are coming and what sales you'll make. that guy looks like he designs web sites. i'm surprised even asking that question. >> yeah. the beauty of internet marketing is that it's trackable. not just pulling a tv ad up. let's move to the next one. this is a question about making products overseas. >> we manufacturer in china, and i would love to know what is the best way to protect your products when you're trying to manufacturer in china. >> as much as they're growing, one of the biggest issues that they're facing now is regulation and cronyism and corruption and all of that. a great place to do business. it is like the wild west. what do you do to protect yourself? you have to have experts to surround yourselves. i don't want to take anything away. you have a good attorney that is local in china. you have a good representative that's there. people that i know going into china and selling, they're not doing it themselves. they're hiring agents to do it for them. people who know the system. >> you need a local
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representative, 100% people. but behind that you need legal agreements. you need a binding relationship and tie it to payment. tie it to, you know, this is my product, this is intellectual property around it. i'm sharing that with you. you're manufacturing something for me, you cannot share with a competitor. if you do, this is a monetary penalty associated with it. that's the kind of way to approach these situations. >> that's good advice. it's not only the legal side but it is get be money, as well. >> of course. >> everybody's on the up and up. clients know they're going to china, talk to the bank first. get a letter of credit behind you. you've got some type of security for somebody who doesn't pay. it's not just stealing your ideas, but it's collecting the cash. >> all right. great advice, you guys. thank you very much. and if any of you out there have a question for our experts, go to our web site. the address is openforum.com/yourbusiness. there just hit the "ask the show link" to submit a question for the panel.
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openforum.com/yourbusiness. or you can e-mail questions and comments to yourbusiness@msnbc.com. divya and gene had great advice about how to improve your business. now let's get some great ideas from small business owners just like you. >> my great idea is to use your customers and your community as a resource for hiring. and for new ideas about how to run your business. so we found that by using social technology on line that we can engage the women who buy our products and who use our site both as potential employees and also as people who have been amazingly helpful volunteers. >> in my opinion, the number-one thing that my business partners and i have learned is motivation and motivating employees. keeping them enthused and engaged and happy. we are constantly doing things for our staff such as just outings during the day. >> get large orders first before
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you go and fulfill the orders. this thing called negative working capital which is, you know, obviously in 2010 really, really important with all of the banks still for small businesses as tight as they are, and it also helps with regular cash flow management. do you have a hard time keeping track of all of the business cards you receive? i know i have them all over the bottom of my purse and in my wallet. so i need this web site of the week. captureng.com can help you keep track of easy to lose objects like business cards and receipts. take a picture with your iphone or blackberry. the image will then appear in your account on the site within 30 seconds. you can organize then at your convenience. irs-approved expense reports can also be created through the site. to learn more about today's show, click on our web site. it's openforum.com/yourbusiness.
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you'll find all of today's segments plus web-exclusive content with more information to help your business grow. and don't forget to become a fan of the show on facebook. we look forward to get something of your feedback. also, you can follow us on twitter. it's ali @msnbcyourbiz. ahead, running a business with your spouse. >> you work with your husband? how do you do it? oh, my god, i would kill him. >> find out how this husband and wife team successfully manages their family and their growing business. until then, i'm j.j. ramberg. remember, we make your business our business. this is my band from the 80's, looker. hair and mascara, a lethal combo. i'm jon haber of alto music.

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